Thanks so much for sharing your experience! Have you ever had any issues with state filing through FreeTaxUSA? I've heard their federal is great but some people complained about the state portion.

I've done both federal and state with FreeTaxUSA with no issues at all. The state portion isn't free like the federal filing, but it's still way cheaper than TurboTax - I think I paid about $15 for state filing last year. The state section works exactly the same way as the federal part - straightforward questions and it imports all your relevant info from the federal return automatically. I'm in California which has some complex state tax rules, and it handled everything correctly. The software even flagged when I qualified for a specific state credit I didn't know about.

This is what I keep telling my friend! She made like $700 on Etsy last year and is freaking out about getting audited. It's just not worth the IRS's time to go after such small amounts unless you're doing something really weird with your deductions.

Thank you for mentioning this! I've actually had my Roth since 2018, so it's been over 5 years. And I've never done any conversions - all of my contributions were direct to the Roth IRA. Based on what everyone is saying, it really sounds like Fidelity just coded the 1099-R incorrectly. I'll contact them tomorrow to request a corrected form with the right distribution code. In the meantime, I'll fill out Form 8606 Part III to document that these were contribution withdrawals and therefore not taxable. This has been super helpful!

Glad to hear your account meets the 5-year requirement! That definitely makes things simpler. When you call Fidelity, specifically ask them to issue a corrected 1099-R with distribution code J in Box 7, which indicates an early distribution from a Roth IRA with no known exception. This is the correct code for withdrawal of contributions. Even if they take a while to issue the correction, go ahead and file with Form 8606 as you mentioned. If the IRS questions it, you'll have documentation showing these were return of contributions. Good luck!

Is there any penalty to the financial institution for issuing incorrect 1099s? Seems like they should be more careful since this directly impacts people's taxes!

There's no direct penalty to financial institutions for most 1099 errors unless they're systemic or intentional. The IRS recognizes that mistakes happen, which is why there's a process for issuing corrected forms. However, firms can face penalties for late filing or intentional misreporting. The bigger issue is that most large institutions use automated systems to generate these forms, and special situations like Roth contribution withdrawals often require manual intervention to code correctly. While annoying for customers, it's generally viewed as an administrative error rather than something that would trigger penalties.

That's a good point about the payment plans. I hadn't considered that they might be filing but just paying over time. About talking to my neighbor who runs the business, I'm honestly not sure how to bring it up without making it awkward. He's not a close friend, more of an acquaintance, and I don't want him to think I'm poking around in his business affairs.

If you're not comfortable talking to the business owner, that's understandable. These situations are definitely awkward. Maybe the best approach is to simply stay out of it then. The IRS has matching systems that will eventually catch up with them if they are indeed not filing or paying. If it really bothers you on a moral level, you could file that Form 3949-A that was mentioned earlier and let the IRS handle the investigation. That way you're not directly involving yourself or your neighbor in an uncomfortable conversation.

This is so true! I had a similar experience. I was a contractor for the first time in 2023 and had NO IDEA I needed to make quarterly estimated payments. Got hit with a huge tax bill plus penalties. The IRS payment plan interest rates are no joke either.

It's a painful lesson to learn! The tax system really isn't designed for people to easily understand, especially when transitioning from W-2 to 1099 work. The quarterly estimated payments catch so many people off guard. What's worse is that the longer someone goes without filing, the more intimidating it becomes to start. The fear of what you might owe can be paralyzing. I hope these women get proper tax advice before they dig themselves into a deeper hole.

Thanks! Is there a way to attach the CSV file directly or do I have to manually type each transaction? I have about 74 trades to report from last year.

Unfortunately FreeTaxUSA doesn't have a direct CSV import feature for crypto transactions. You'll need to enter them manually if you're not using a third-party tool like some others mentioned. If you have a lot of transactions, you might want to consolidate them by date if they're similar (like multiple small trades on the same day with the same cryptocurrency). FreeTaxUSA has a "Form 8949" checkbox that lets you indicate you're reporting summary information rather than each individual trade. Just make sure your totals are accurate.

What information did the exchange send if they didn't give you a 1099-B? I thought smaller exchanges weren't required to report?

Wouldn't that mess up all your existing categorizations and receipt attachments? I have about 300+ transactions with receipts carefully attached and categorized for tax purposes. Starting over sounds terrifying.

You're right to be concerned about losing attachments. The export/import method works best if you haven't attached many receipts yet. In your case with 300+ transactions with attachments, I'd definitely go with the selective deletion approach instead. If you do need to delete transactions one by one, a time-saving tip is to open two browser windows side by side - one showing your bank's actual transactions and the other showing your QuickBooks register. This makes it easier to quickly identify which entries are the duplicates as you go through them.

This is brilliant! I just checked my audit log and can clearly see which transactions I entered manually vs which came through the bank feed. This will make cleanup so much faster. Does anyone know if there's a way to filter the audit log to only show transaction creations?